Tims ethanolportstoplains

Biofuels:Biofuels:From Ports-To-PlainsFrom Ports-To-Plains

Presented by

Tim Lust

National Sorghum Producers

Blue RevolutionBlue Revolution

Today’s Transportation FuelsToday’s Transportation Fuels Today’s Transportation FuelsToday’s Transportation Fuels

Gasoline – 140 billion gallons Diesel – 45 billion gallons E85 – 10 million gallons

Ethanol as an additive (E-10) – 4.8 billion gallons – Extends gasoline – blended in 40% of gasoline– Adds 300,000 barrels of supply

– Biodiesel is important as well

Energy Security BenefitsEnergy Security Benefits

Two-thirds of known oil reserves in the Mideast

Today, 97% of transportation energy comes from petroleum, of which 65% is imported

U.S. energy imports to grow to more than 71% in 2025 according to EIA

EIA estimates oil prices at near or above $50/barrel through 2030

Under the RFS, use of renewable fuels will reduce oil imports by 2 billion barrels

Ethanol’s Environmental BenefitsEthanol’s Environmental Benefits

Reduces emissions of CO, exhaust VOCs and NOx, particulates, hydrocarbons

Displaces toxics – benzene, toluene Renewable – reduces greenhouse gas

emissions Displaces fossil energy use Reduces CO and ozone through oxyfuel

and RFG programs

U.S. Ethanol Industry TodayU.S. Ethanol Industry Today

Annual production record in 2005 of 4 bgy 105 plants in 19 states with over 4.8 bgy

capacity today (September 2006) 44 plants under construction, combined w/

7 expansions, will increase industry capacity an additional 3 bgy (August 2006)

Dozens of additional plants in various stages of development

Farmers Leading the Fight for Farmers Leading the Fight for Energy IndependenceEnergy Independence

Rural Revitalization! 47% of the 101 current ethanol plants are

owned by farmers Majority of ethanol plants under

development are farmer-driven projects

Historic U.S. Ethanol ProductionHistoric U.S. Ethanol Production

0

500

1000

1500

2000

2500

3000

3500

4000

gal

lon

s (m

illi

on

)

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Ethanol Production Will Nearly Triple Ethanol Production Will Nearly Triple Over the Next DecadeOver the Next Decade

0

2,000

4,000

6,000

8,000

10,000

12,000

1990

1993

1996

1999

2002

2005

2008

2011

2014

MG

Y

Actual Forecast

LECG

Renewable Fuels Standard (RFS)Renewable Fuels Standard (RFS)(Energy Policy Act of 2005)(Energy Policy Act of 2005)

RFS (bgy)4.0 in 20064.7 in 20075.4 in 20086.1 in 20096.8 in 20107.4 in 20117.5 in 201241.9 = Total

2013+ Proportional to

renewable fuels/gasoline ratio

Includes 250 mgy cellulose ethanol requirement

4.7% of National Fuel Supply by 2012

RFS vs. RFA ProjectionsRFS vs. RFA Projections

RFAYear RFS Projections 2006 4.0 5.12007 4.7 6.62008 5.4 7.92009 6.1 8.62010 6.8 9.32011 7.4 9.92012 7.5 10.3

Agriculture as Energy ProducersAgriculture as Energy Producers

In 2005, 1.43 billion bushels of corn (13% U.S. crop) and 15% of the nation’s grain sorghum crop used for ethanol

Ethanol is the 3rd largest market for corn and 2nd largest market for sorghum

Ethanol dry mills produced record 9 million metric tons of distillers grain livestock feed in 2005

Politics and Politics and EthanolEthanol

Are LOCAL Are LOCAL

EXCEPT WHEN THE PRESIDENT MAKES THEM NATIONAL

Site Evaluation Matrix– Class 1 rail– Class A highway access– Available water– Available land– Accessible animal feeding units– Proximity to local starch source– Energy access– Local synergies

Community Leaders on a MissionCommunity Leaders on a Mission

Annual Local Economic Impact of a Annual Local Economic Impact of a 100 mgy Facility100 mgy Facility

Spend an estimated $88.2 million for goods and services

Use 36.4 million bushels of sorghum/corn Operational spending will generate $406 million

for the local economy Increase the size of the state economy by $223

million Generate nearly 1,600 new jobs Increase household income by more than $50

millionSource: “Contribution of the Ethanol Industry to the Economy of the United States,” LECG, LLC, February 2006

Industry Responds to Industry Responds to Rising DemandRising Demand

2005 Production represents a 17% increase from 2004 production and a 126% increase from 2001 – mostly in new coastal markets

Once just a niche fuel, today 40% of all gasoline sold in the U.S. contains ethanol!

Increasing production activity outside corn belt, including CA, CO, OR, NM, TX, AZ

Courtesy RFA

Importance of the IndustryImportance of the Industry

A recent study concluded gasoline prices would increase 14.6% in the short term (36.5 cents/gallon if gas is $2.50/gallon), and 3.7% in the long term (9.3 cents/gallon if gas is $2.50/gallon) even after refiners build new capacity or secure alternative sources of supply.

According to the Consumer Federation of America, consumers could pay as much as 8 cents per gallon less if oil companies blended ethanol rather than higher-priced petroleum products (May 2005).

Grain to Ethanol ProductionGrain to Ethanol Production

What does it look like today??

Sweet Sweet SorghumSorghum

Source: William Rooney, Soil and Crop Sciences, Texas A&M University

Grows in 35 U.S. States

Yield = 20–25 Dry Ton / (Acre·Yr)

What about Cellulosic ethanol?What about Cellulosic ethanol?

Technology and cost are limiting factors. Current technology for cellulosic ethanol is

the acid hydrolysis process. – Capital costs are almost 4X that of dry mill

ethanol.– Operating costs are 50% above corn dry mill

costs. Enzymatic process holds promise for lower

costs, but is not yet commercialized. Cellulose ethanol will happen, but large

scale production not likely before 2015.

LECG

CONCLUSIONCONCLUSION

Good and not so good

BenefitsBenefits

Rural America– Builds infrastructure to support bioenergy– Creates new tax base to support rural

America– Encourages job development in rural

America

BenefitsBenefits

National Security– Reduce dependency on Foreign Energy– Creates job security in rural America– Investment into rural America– Less dependence on Foreign export for our

Agricultural communities– Development of new energy technologies

Challenges to ConsiderChallenges to Consider

Water Laws (state/local level)Transportation Issues

Capacity (MGPY) 30 50 100

Grain In (Trucks/yr) 11,080 18,467 36,934

Grain In (Trucks/day) 30 51 101

DDGS Out (Trucks/yr) 8,733 14,555 29,110

DDGS Out (Trucks/day) 24 40 80

TRUCK TRAFFICTRUCK TRAFFIC

The Future’s BrightThe Future’s Bright

+

=

Thank YouThank You